Year of the Golden Pork Shortage

In retrospect, we should have seen it coming. As pork prices are up 43% compared with last year, the Year of the Golden Pig seems to have been a prophecy we all too happily ignored. The Chinese government is certainly not ignoring the problem now, and we have all seen Premier Wen Jiabao’s calm face, pledging that the government will make sure there are enough pork chops for everyone, and showing how high this issue sits on the Party’s list of priorities.

Amid increasing talk about inflation, it is no surprise that price jumps in one of China’s staple foods has raised concerns at such a high level, and though there are some that think China is growing out of its low-priced past, it would seem that this recent jump can be attributed more to issues in the market rather than the rising CPI.

The hike in pork prices can be attributed to a number of factors ranging from increased feed prices (as a result of ethanol production’s effects on the price of corn feed), and outbreaks of blue-ear disease which, according to China’s Ministry of Agriculture (from Reuters), has killed 18,000 pigs in the first five months of this year.

What I found most interesting was an article by Andrew Batson in the Wall Street Journal looking at how a lack of access to information is keeping Chinese farmers stuck in this boom and bust cycle.

China’s pork prices generally tend to rise and fall in major cycles of three to four years; the last big surge came in 2004. (That this year’s price spike comes during the Chinese zodiac’s year of the pig appears to be a coincidence.) The pattern is now well enough established that farmers should, in theory, be able to smooth out the fluctuations. The main problem: bad information and poor planning that leads too many farmers to pull out of the market, or jump in, at the wrong time.

Bigger farms often have an advantage in riding out market cycles. Ms. Guo’s farm, for instance, produces about 8,000 pigs ready for slaughter each year. Unlike the many individual households that may raise only 15 to 20 pigs, her farm won’t sell off all its stock if prices drop.

“Farmers are totally rational. It’s just very difficult for them to get the kind of information they need to make scientific decisions,” says Mr. Wu, who would like China’s agriculture ministry to be more like the U.S. Department of Agriculture and distribute extensive information about weather, production and prices to help farmers plan ahead. Now, some farmers complain that price information from the government is spotty and inaccurate. So they often rely on tips picked up at the feed store to judge the direction of the market.